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2020 (12) TMI 1367 - AT - Income TaxTP Adjustment - adjustment has been made without properly appreciating the business model of the assessee - HELD THAT - This issue was there in the appeal for the assessment year 2014- 2015 wherein the Tribunal in 2020 (2) TMI 1642 - ITAT BANGALORE after examining the facts of the case had accepted the contention of the assessee that the TPO conducted transfer pricing analysis on erroneous understanding of the business model of the assessee. Accordingly the entire transfer pricing issue was set aside to the TPO with a direction that the transfer pricing analysis may be carried out having regard to the business model of the assessee - we restore the entire transfer pricing analysis for de novo consideration to the AO / TPO. Appeal filed by the assessee is allowed for statistical purposes
Issues:
Transfer pricing adjustment without proper appreciation of business model. Analysis: The appeal was against the final assessment order for the assessment year 2013-2014, where the assessee, an IT services company, declared a loss in its return of income. The assessment was taken up for scrutiny, and the Transfer Pricing Officer (TPO) determined an adjustment of Rs. 28,27,00,781 under section 92CA of the Income Tax Act. The Assessing Officer included this adjustment in the draft assessment order, and the Dispute Resolution Panel (DRP) upheld the adjustment. The primary issue raised in the appeal was that the transfer pricing adjustment was made without properly understanding the business model of the assessee. The Tribunal referred to a previous judgment in the assessee's case for the assessment year 2014-2015, where it was found that the TPO had conducted the transfer pricing analysis based on an erroneous understanding of the business model. The Tribunal had set aside the issue for de novo consideration to the TPO, directing that the analysis should be carried out considering the business model of the assessee and using comparables with a similar business model. The Tribunal noted that the facts for the assessment year 2013-2014 were similar to those in the assessment year 2014-2015 and accordingly restored the entire transfer pricing analysis for de novo consideration to the Assessing Officer / TPO. Therefore, the Tribunal allowed the appeal for statistical purposes, ordering the transfer pricing analysis to be reconsidered by the Assessing Officer / TPO in line with the business model of the assessee and using functionally similar comparables. The decision was pronounced on December 15, 2020.
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